Facts of the Case

The present writ petitions were filed by the petitioner challenging assessment orders passed under Sections 153A and 143(3) of the Income Tax Act, 1961, along with notices of demand under Section 156 and penalty notices under Section 274 read with Section 271(1)(c) for multiple assessment years ranging from 2013–14 to 2019–20.

The petitioner contended that the assessment orders dated 09.06.2021 and 10.06.2021 were passed without granting an effective opportunity of hearing. It was argued that due to a communication (email dated 21.04.2021), the petitioner believed that the deadline for filing responses stood extended indefinitely, particularly in light of the COVID-19 lockdown in Delhi.

Significant tax demands along with penalty proceedings were imposed without allowing the petitioner to submit relevant documents and explanations.

Issues Involved

  1. Whether the assessment orders passed under Sections 153A and 143(3) violated the principles of natural justice.
  2. Whether failure to provide adequate opportunity to respond to notices under Section 142(1) renders the assessment proceedings invalid.
  3. Whether the circumstances of COVID-19 lockdown justified the petitioner’s inability to respond within time.

Petitioner’s Arguments

  • The impugned assessment orders were passed without granting an effective opportunity of hearing, thereby violating natural justice.
  • The petitioner relied on an email communication dated 21 April 2021, which did not specify any deadline, leading to a bonafide belief of indefinite extension.
  • Due to the COVID-19 lockdown in Delhi, the petitioner was unable to prepare and submit responses along with supporting documents.
  • The lack of opportunity resulted in prejudice, as substantial tax demands and penalty proceedings were initiated without considering the petitioner’s explanation.

Respondent’s Arguments

  • The Revenue contended that the original notices dated 21 April 2021 were validly issued.
  • It was argued that the subsequent email relied upon by the petitioner was not issued by the department.
  • The respondent submitted that sufficient compliance with principles of natural justice existed based on the initial notices issued.

Court’s Findings / Order

  • The Delhi High Court held that principles of natural justice were not adequately complied with.
  • The Court observed that:
    • The petitioner did not get a sufficient opportunity to respond to notices under Section 142(1).
    • The COVID-19 lockdown period (19 April 2021 to 07 June 2021) significantly affected the petitioner’s ability to respond.
    • The petitioner had relevant documents which could have clarified the issues if an opportunity had been granted.

Final Order:

  • The impugned assessment orders dated 09.06.2021 and 10.06.2021 were set aside.
  • The matter was remanded back to the Assessing Officer for fresh adjudication.
  • Directions issued:
    • Petitioner to file responses within two weeks.
    • Personal hearing to be granted.
    • Fresh reasoned order to be passed in accordance with law.

Important Clarification

  • Even if statutory notices are issued, effective opportunity of hearing must be real and meaningful, not merely procedural.
  • Administrative actions during extraordinary situations like COVID-19 lockdown must be interpreted reasonably.
  • Any ambiguity in communication by tax authorities can lead to violation of natural justice if it prejudices the assessee.

Sections Involved

  • Section 153A – Assessment in case of search or requisition
  • Section 143(3) – Regular assessment
  • Section 142(1) – Inquiry before assessment
  • Section 156 – Notice of demand
  • Section 271(1)(c) – Penalty for concealment
  • Section 274 – Procedure for penalty

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2014-DB/MMH09072021CW62782021_093041.pdf.


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